What items are included and available for distribution between parties after the breakdown of a relationship seems like an easy question, however sometimes it can be rather complex.
What is Property Settlement in Family Law?
Within the field of Family Law, property settlement (also known as “Division of property”) refers to the separation of assets and finances.
Lawyers refer to the items available for distribution between parties as the “property pool”.
Assets owned by you and your partner, either jointly or individually such as houses, vehicles, and funds in bank accounts are easy to identify as forming part of the property pool.
The family business can also be included in the property pool, if the business is owned by the parties or one of the parties. A party’s interest as a Trustee or Director in property, including houses, shares or cash owned by a trust or corporate entity can be included in the property pool.
An inheritance received during the relationship will also form part of the property pool potentially available for distribution.
Debts are also typically included in the property pool, unless for example a party has deliberately incurred the debts to minimise the property pool.
Financial resources, which are assets that a party has an interest in, but cannot access just yet, are also included in the property pool. For example, superannuation is a financial resource as generally it cannot be accessed until a party reaches preservation age. Superannuation can be split, where your former partner can receive a proportion of your superannuation interest, which then remains as superannuation accessible typically when your ex-partner reaches preservation age.
Compensation payments and inheritances that have been quantified and due for distribution in the not too distant future are also financial resources that can be included in the property pool.
Sometimes parties go on a spending spree after separation to deliberately minimise the property pool. Depending on the funds spent and the reason for the expenditure, the value of the spent funds can be added back into the property pool.
How are Property Settlements Determined?
There are several considerations that need to be made before determining what each party is entitled to after the breakdown of a relationship. The main steps are as follows.
- Determine the property pool between parties.
- Consider financial contributions of each party.
- Consider indirect financial contributions to the relationship (such as inheritances and gifts).
- Consider non-financial contributions to the relationship (can include caring for children or being considered the homemaker).
- Consider future requirements of each party (such as health considerations, financial resources, childcare, employment prospects and age).
Is There a Time Limit for Property Settlements?
- For de facto relationships, property settlement applications must be made within 2 years of separation.
- For married couples, applications for property settlement must be made within 12 months of the divorce becoming final.
It is important to obtain legal advice early to ensure the property pool can be properly identified, and if need be, protected.